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Tuesday, May 10, 2011

Banker sentenced for mortgage fraud

Jeffrey L. Levine, 70, Atlanta, Georgia, was sentenced by United States District Judge J. Owen Forrester to serve 5 years in federal prison on charges of causing materially false entries that overvalued bank assets to be made in the books, reports, and statements of Omni National Bank.

Levine was sentenced to 5 years in prison to be followed by 5 years of supervised release, and ordered to pay restitution in the amount of $6,761,791. Levine pleaded guilty to the charges on January 14, 2010.

As previously reported by Mortgage Fraud Blog, and according to the charges and other information presented in court: Levine was Executive Vice-President, the second largest bank shareholder, and head of the Community Redevelopment Lending Department at Omni National Bank from 2000 through October 12, 2007. To keep non-performing loans current on paper, Levine and others at Omni failed to disclose many exceptions to their policies and procedures which resulted in Omni being exposed to a greater risk of loss. Practices that went unreported included: diversion of loan proceeds escrowed for rehab; excessive credit concentrations to a single borrower; funding additional loans for Omni foreclosures at ever-increasing amounts; and failing to create sufficient reserves for those questionable loans or to properly record them on Omni's books and records.

Before takeover by the FDIC on March 27, 2009, Omni was headquartered in Atlanta with branch offices in Birmingham, Tampa, Chicago, Fayetteville, N.C., Houston, Dallas and Philadelphia. Omni borrowed federal funds at low rates to make high-interest, short-term loans through Levine's Community Redevelopment Department to borrowers with less than stellar credit and often no steady employment or formal education. Such Omni borrowers were supposed to purchase and rehab distressed properties for prompt resale or Section 8 rental in run-down, inner-city neighborhoods. Borrowers were expected to do most of the rehab themselves within a few months of the loan, and qualify for a loan to purchase a second property only when the first property was sold or ready for sale. Omni, its regulators and investors relied on the expected increased value of the property after rehab to be well in excess of the loan amount. The Redevelopment Department generated a significant portion of the Omni profits reported on its books and reports, although the facts now show that those profits were materially overstated.

Levine and others were well aware that none of the foreclosed properties could be sold on the open market for the amount of the outstanding Omni loans. A number of foreclosures were never disclosed on the Omni books as required, and some properties were resold up to five times at ever-increasing amounts. The actions of Levine and others at Omni resulted in an overvaluation of bank assets, which in turn misled Omni's outside auditors, its Office of the Comptroller of the Currency regulator, its FDIC insurer, the Securities and Exchange Commission, and Omni shareholders. Such practices contributed to the over 500 foreclosures and an additional 500 non-performing loans, which resulted in at least $7 million in losses to the FDIC.

The evidence showed that the HUD Section 8 Program and its tenants also suffered, because many of the Omni-funded distressed properties were not rehabbed, but rather stood vacant or were inhabited by squatters for years, corrupting other Section 8 properties and the community. Even if rented, the frequent Omni foreclosures resulted in unstable housing for Section 8 tenants, as well as increased crimes resulting from the vacant properties and transient tenants.

Additional Omni-related prosecutions to date include:

Delroy Oliver Davy, 38, Lithonia, Georgia, pleaded guilty on May 11, 2010, to bank fraud and conspiracy to commit bank, mail and wire fraud, in connection with a scheme to fraudulently obtain millions of dollars of mortgage loans from Omni and other lenders. Davy was sentenced by Judge Forrester to serve 14 years in prison.

Karim Walthour Lawrence, 33, Atlanta, Georgia, pleaded guilty on January 5, 2011, to accepting bribes from contractors he selected to rehab Omni foreclosed properties while he was an officer of Omni. He will be sentenced before United States District Judge Willis B. Hunt, Jr. A sentencing date has not yet been set by the court.

Christopher Bernard Loving, 33, McDonough, Georgia, was sentenced on August 24, 2010, to 3 years probation for making false statements to agents of the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the FDIC in connection with an investigation of kickbacks he paid Omni officer Karim Lawrence for construction contracts.

Brent Merriell, 39, Atlanta, Georgia, was sentenced on August 3, 2010, to over 3 years in prison for making false statements to the FDIC regarding short-sales of Omni-funded properties and aggravated identity theft. Merriel's conviction resulted from a SIGTARP/FDIC sting operation.